Inequality worse now than on ‘Downton Abbey’
marketwatch.com
marketwatch.com
I also find it interesting that "inequality" is based solely on "share of national income", as if there is just this big pile of ex nihilo money being apportioned out unfairly.
[1] http://annualletter.gatesfoundation.org/~/media/Annual%20Let...
First, rising income inequality/relative poverty is economically harmful. It's simply not sustainable forever, especially in the consumer economy that the US has. Capital gains in particular cannot continue to exceed general economic growth without something eventually giving.
Second, relative poverty creates social exclusion, leading to social stratification, low social mobility, and a whole host of related problems. This is probably best seen in the rising cost of college tuition in the US, creating an ever higher barrier for access to the middle class (admittedly, exacerbated by the fact that the US has no VET system worth speaking of). Perversely, where the affluent European countries invest in the education of their citizens, some US states seem to try and position themselves as low-wage alternatives to Mexico and China. Especially considering the ever-increasing levels of automation, this is all kinds of crazy.
Also, with respect to absolute poverty, while the American poor have it generally better than serfs in Czarist Russia or most of the people in your average third world country (not a very high bar, of course), there's still plenty of hunger and homelessness in the US.
If I gave you data showing that college consumption is at an all time high and mobility remains unchanged, in spite of a large increase in inequality, would that convince you your beliefs are incorrect?
If not, what data (if any) would cause you to change your beliefs?
So it isn't surprising that social mobility is actually experiencing a slight downward trend [1].
But to elaborate: A college degree has become more crucial than ever for the chance at a middle class life in America, yet real wages have stagnated, despite higher college attendance, and a college degree isn't worth what it used to be, either [2], while student debt has exploded [3]. In fact, even life expectancy is correlated with education and has even fallen for the least educated [4].
As a result, colleges have a seller's market available to them (in part propped up by the student loan scheme, though it likely wouldn't be all that much different without). Conversely, people are willing to sacrifice current and future income to essentially tread water economically (=> stagnant real wages).
[1] http://www.businessinsider.com/the-american-dream-is-now-a-m...
[2] http://www.thedailybeast.com/articles/2013/03/27/why-a-ba-is...
[3] http://www.theatlantic.com/business/archive/2011/08/chart-of...
[4] http://www.motherjones.com/kevin-drum/2013/01/not-everyone-l...
Over the relevant time period of comparison (70's to today), GINI has increased from about 40% to 47%.
http://upload.wikimedia.org/wikipedia/commons/e/e3/The_US_Gi...
Mobility has remained flat over this time period. Over the same time period, college enrollment has gone from about 45% to 70%.
http://www.bls.gov/opub/ted/2010/ted_20100428.htm
Based on the historical data, it looks as if inequality increases college enrollment and does not alter mobility. (Assuming of course, as most inequality mongers tend to do, that correlation == causality. Which is silly but whateve.r)
Your two predictions have not passed the real world test. Again: what data would convince you that your theory is wrong?
To convince me I'm incorrect, it's very simple. I'd want to see an exogenous change in inequality result in some measurable effect. For example, suppose for some reason a hord of rich people to move into some locale - I'd want to see something bad happen to the non-rich people who remain there above and beyond regional trends.
You're confusing the Gini before taxes and transfers with the Gini after taxes and transfers (which is the one relevant for inequality). Also, the past two decades started in the 90s, not the 70s.
Based on the historical data, it looks as if inequality increases college enrollment and does not alter mobility.
There's been a lot else going on since the 1970s (end of the Cold War, the internet, increasing acceptance of women going to college, just to name a few factors). I really don't know how you get the idea that there's just one single factor affecting college enrollment (see also the Flynn effect, which is likely a pretty huge factor). If you want to claim that increasing inequality increases college enrollment, you'll have to provide better support for such a claim.
More importantly, while college enrollment rates have increased, college graduation rates (relative to enrollment) have decreased [1], and overall college degree attainment has shown relatively little change [2]. This is consistent with the general experience that, while tuition does not necessarily form an obstacle to initial enrollment, the additional financial pressure often makes it hard to actually maintain a course of study (especially if that requires you to work more while studying full time).
For all practical purposes, higher tuition fees do create a barrier to enrollment. That there have historically been countervailing factors does not mean that more expensive college tuition does not functionally retard enrollment relative to what it would be otherwise. Also, what increase there is in college enrollment comes at the cost of an explosion in student loan debt, where families saddle themselves with long term financial liabilities, more and more often without a degree to show for it.
[1] http://en.wikipedia.org/wiki/Decreasing_graduation_completio...
[2] https://www.census.gov/hhes/socdemo/education/data/cps/histo...
But please recognize that you are in a minority here - most left wing sorts don't look at data after taxes and transfers. For example, anyone who talks about poverty is talking about pre-tax/transfer data (after taxes and transfers, poverty is almost nonexistent).
I really don't know how you get the idea that there's just one single factor...
I don't really get why you completely ignored the sentence right after the one you quoted, which explicitly says I don't think correlation is causality.
You still have not clearly stated what data would falsify your theory. Should I conclude that your claims are unfalsifiable, and therefore closer to a religious claim than a scientific one?
Umm, Google, Wikipedia? http://en.wikipedia.org/wiki/File:GiniPlots_USA.png
See also [1] for a list of countries by Gini both before and after taxes/transfers.
But please recognize that you are in a minority here - most left wing sorts don't look at data after taxes and transfers. For example, anyone who talks about poverty is talking about pre-tax/transfer data (after taxes and transfers, poverty is almost nonexistent).
Say what? For example, Germany actually has higher inequality than the US before taxes and transfers, but significantly lower inequality after taxes and transfers [1]. And even egalitarian Finland's pre-tax Gini isn't much different from that of the US (taxes and transfers cut it almost in half). Inequality before taxes and transfers is practically unavoidable in a developed countries; taxes and transfers are the difference between the European social democracies and the US.
And no, poverty is not non-existent after taxes and transfers; about one in six Americans lives in a food-insecure household [2]. Ever been to Gary, IN [3], East St. Louis, or Chicago's South Side? America has not only a high relative poverty rate, but also a high absolute poverty rate (compared to the rest of the developed world).
Also, why do you seem to assume that I'm a "left wing sort" (other than by tea party standards where Rockefeller Republicans are proto-communists)?
You still have not clearly stated what data would falsify your theory. Should I conclude that your claims are unfalsifiable, and therefore closer to a religious claim than a scientific one?
Huh? Just because a random variable that is the aggregate of many other random variables (college enrollment) is not sufficient to make statements about one of the component random variables (college tuition) does not mean that it's unfalsifiable. You do have to control for the other variables, though. But there's nothing inherently unfalsifiable about a relation between tuition and college enrollment/completion. Just because you can't find it easily on Google doesn't mean that you couldn't design a study to examine that relation minus confounding factors. And the evidence is strong that there is such a relation (it's also common sense - if a good becomes more expensive, fewer people will purchase this good, unless there are countervailing effects).
If you look at it more closely, for example, you will learn that income affects college graduation rates and college degree attainment rates (and, conversely, having a college degree affects income and social mobility) [4]. Higher tuition both negatively affects graduation rates and also segregates low-income students into lower quality colleges (or kept out of college entirely). The underlying paper by Bailey and Dynarski [5] documents pretty clearly that income inequality translates into inequality in educational attainment and that low-income students dropping out disproportionately often is a major driver of this effect.
[1] http://en.wikipedia.org/wiki/List_of_countries_by_income_equ...
[2] http://feedingamerica.org/hunger-in-america/hunger-facts/hun...
[3] http://www.businessinsider.com/gary-indiana-photos-2012-7
[4] http://money.cnn.com/2011/11/21/news/economy/income_college/
Just because a random variable that is the aggregate of many other random variables (college enrollment) is not sufficient to make statements about one of the component random variables (college tuition) does not mean that it's unfalsifiable.
So how do you falsify it?
Also, I didn't ask about a relation between tuition and graduation. I asked about a relation between inequality and enrollment.
The underlying paper by Bailey and Dynarski [5] documents pretty clearly that income inequality translates into inequality in educational attainment...
Looking at educational attainment* as opposed to enrollment is a bit, um, confusing. Is it your assertion that a higher GINI somehow makes the poor (specifically poor women, if we go by that paper) less willing to study than their richer counterparts?
Not that it matters, since the paper doesn't look at inequality at all. All it shows is that higher quintiles have higher graduation rates - this is completely unrelated to the question of whether increasing the size of quintiles effects graduation rates.
Also, if you read your source [5] (the middle, not the conclusions), you'd discover that the strongest explanation they have of their results is that children of poorer parents are not as smart as children of rich parents, which explains half the gap. So unless your claim is that higher GINI makes poor kids stupid, it's nonsensical to claim inequality has anything to do with graduation rates.
I give up. You have unfalsifiable beliefs which are somehow supported by academic papers on completely unrelated topics. Not anything for me to learn here.
I didn't say that it didn't change; I said it didn't change much.
So how do you falsify it?
As with any other such case, by controlling for those variables you want to eliminate.
Is it your assertion that a higher GINI somehow makes the poor (specifically poor women, if we go by that paper) less willing to study than their richer counterparts?
Looking at educational attainment as opposed to enrollment is a bit, um, confusing.
It was you who brought up enrollment, not I. I was speaking in general terms about tuition as a barrier to access to postsecondary education. Enrollment is a very poor proximate variable for success at college due to increasingly high dropout rates.
Not that it matters, since the paper doesn't look at inequality at all.
From the paper: "In this paper we document changes over time in inequality in educational attainment by family income [...]". Differences in family income, of course, mean income inequality.
So unless your claim is that higher GINI makes poor kids stupid
As it so happens, precisely that may be the case (we'd need further corroboration to be fully certain, but it'd hardly be surprising - stress of all kinds is known to have a deleterious effect on IQ, so stress from poverty shouldn't be any different): http://www.businessinsider.com/poverty-effect-on-intelligenc...
It's not something I had talked about in this thread, so this is not "my claim" in that sense, but it is another example of the pernicious effects of inequality.
I give up. You have unfalsifiable beliefs which are somehow supported by academic papers on completely unrelated topics.
I think you simply do not understand what "unfalsifiable" means. Practically any statement that relies on observations of natural phenomena is in principle falsifiable by making observations counter to that statement; it may just be difficult to do that. Statistical phenomena also slightly complicate the situation, though the principle remains the same.
That you have a different opinion or disagree is fine - the data is hardly conclusive either way, though your interpretation does make some very counterintuitive assumptions (in particular, that people are more likely to pay for a good or service - namely, college – the less they can afford it); that you try to give this disagreement a veneer of objectivity by misusing terminology isn't so cool. Especially when you handwave away anything that doesn't fit your preconceptions.
I get the whole "wealth is not zero sum" thing, I can see how it applies at the level of a whole economy. However, at the level of an individual company, there is a finite amount of revenue, and it is divided up in a zero sum fashion. When workers see their own pay going down while the bosses pay leaps by hundreds of percent, all that stuff about fallacious piles of money doesnt really make sense.
And also because more of the income of the super rich these days goes into bidding up the price of positional goods[1] rather than having the biggest possible house or the most possible servants.
:b
The only commodity the rich put anything approaching a substantial amount of money into... is gold. (Oooh, no, the price of gold is too high! think of the children!)
No no. The super-rich put their wealth into BUSINESSES, which is why they remain super-wealthy. Also, they put it into: taxes (incl. the estate tax), charities, their heirs, corporate bonds, government bonds, and positional goods like fine art or NYC penthouses.
It's a show about the end of the period of great inequality, where rising incomes made it far more expensive to employ a team of servants.
So while this article is trying to make it sound like we should all be worried about how inequality is rising, being more unequal than 'Downton Abbey' is a pretty meaningless criterion.
As to the substance of the article, it's using a very arbitrary definition of inequality, looking at the % of total wealth controlled by the richest 0.01%. That is one in ten thousand rich.
It's also meaningless to talk about what share of the total wealth the bottom 90% of people had when comparing time periods so far from each other.
A single person today in the US who is considered below the poverty line makes around $11,000/yr before taxes. In 1911, to be in the same percentile of income that person would have been working 11 hours per day with one 30 minute break, 7 days per week, often in completely unregulated and dangerous conditions. There was no Social Security or unemployment insurance any other kind of safety net, which meant if you were injured during your mandatory 77 hour work week, which was incredibly likely sooner or later, or even if you were just sick or unable to work for any reason, you would have had no income. Having become sick or injured, you certainly would not be able to afford even the rudimentary and almost completely ineffective medical care which existed at that time.
To put it in perspective, someone working the same hours as their doppelgänger from 1911 (77 hours per week, 51 weeks per year), that hard worker living today, earning only minimum wage, would make around $29,000/yr. Whether they work 77 hours or 4 hours per week, today they also have automatic insurance should they become disabled (SSI), automatic medical coverage if they are injured on the job (everyone has workeman's comp insurance whether or not they have healthcare), and on and on.
I'm not trying to paint some picture of perfection, but if you look at the realities of life then and now, it's completely absurd to try to make it seem like one % being lower than another % means life in 2014 has somehow regressed. The trend is clearly to more access to healthcare, better and safer work environments, far less hours spent working despite an improving standard of living, higher quality food, better access to education, less violence and crime, less hunger. In fact, the condition of humans in the world today is better than the in 1911 using literally any measure whatsoever.
So while if you could hop in a time machine, if you are in the Nth percentile today, and you went back to be in the the same Nth percentile in 1911, in 1911 you would own a larger share of the total wealth of the entire country. I don't think that would really make a bit of difference to you, since you would have to work twice as many hours, face a constant threat of complete ruin from common illnesses and likely injuries, and most almost certainly die at a far younger age.
So that's why these types of comparisons are meaningless.
getting the basic needs like shelter, food, water, heat are a lot easier to come by these days (many government services). And many of the poor have TVs (cable even), cell phones, cars, etc.
my point isn't that being poor is no big deal... my point is the rich AND poor both have it better off than they a hundred years ago.
As I (vaguely) recall, PG made a similar point in Hackers and Painters.